Monday 06 March 2017 3:00 pm

BT says it has not overpaid after beating Sky to UEFA Champions League rights

BT has won the battle to secure the UK TV rights for European Champions League football for the next three years in a deal that will cost the telecoms giant £1.2bn and dismissed suggestions it has overpaid for them

The deal, announced this morning, means BT will continue its coverage of Europe's premier club football competition until the 2020-21 season, with rights for the Europa League also included in the deal.

In 2013, BT blindsided the market, when European football authority UEFA first opened up the auction to non-free-to-air channels, by paying £897m for exclusive live rights for three years.

Satellite firm Sky was expected to secure the TV rights in 2013 and is understood to have put in a competitive bid in the latest auction. And while it was surprised by BT's move last time round, it was expected to go toe-to-toe in a bid to grab the content off BT.

Distracted

Today's deal, which will cost BT £397m per year, is a 33 per cent increase in the amount it paid in 2013 – this was then considered to be well ahead of what Sky was prepared to offer.

However, John Petter, BT's consumer chief executive, told City A.M. battle with Sky did not influence his decision-making. “I think you have to really focused or you can easily be distracted," he said.

Petter added that he did not think BT had overpaid in the latest auction. He said:

You have to get yourself into a position where you stay very calm and you stay financially disciplined. And ultimately you are prepared to lose the rights.

In January, BT boss Gavin Patterson said he felt football rights inflation would not continue to surge forever. "It will settle down, I believe, at some point," he said, adding: "We know exactly what the rights of any sport and the competition bring to our audience and customer base. As such we stay within those boundaries."

Pressure

BT is facing increased pressure on its cashflow from a number of places.

It issued a profit warning earlier this year, alongside revealing an embarrassing £530m accounting blackhole in its Italian arm. It will also enter into negotiations with its trustees over its £9bn pension deficit and is facing a battle with regulator Ofcom over the future of its highly cash generative infrastructure subsidiary Openreach.

However Petter highlighted the European football deal needed to stand on its own two feet. “This is not cross-subsidised from any other part of BT, although some of rivals have claimed that. It’s not how this works. The consumer business has a free cashflow of around £1bn.

The challenges we have seen in some parts of the group haven’t really affected this. It comes down to whether I can make an effective business case for my own part of the company.

Analyst reaction

Jerry Dellis, equity analyst at Jefferies said:

£394m per annum was broadly in line with expectations of £389m
"Regaining UEFA rights was critical for BT."
"Positive event but not the turning point. Overhangs remain, notably on regulation and lack of visibility on free cashflow growth post March 2018
In conclusion: "Loss of rights would have undermined retention efforts and pricing power. But the speed of announcement (less than a week after the tender deadline) suggests bidding action was muted."